Before you start stock trading: first think if it is worthwhile
Before you begin stock trading, consider whether it is worthwhile to invest your time and money.
The good news was that. The bad news is that those businesses will only sell you the tools and services. They don’t promise you that you’ll be successful. Whether you make a profit or lose money, the trading company will still receive a charge for each deal.
Since you’re considering investing in the stock market, you’re probably hoping to obtain a good return on your money, which should be higher than what you’d get from mutual funds (which are less risky than single stocks) or even no-risk certificate of deposits (CDs), which offer guaranteed returns.
Read: Which Would You Rather Do Forex Or Day Trading
So, how can you get such high returns? Of course, the answer is straightforward: buy low and sell high. You’ll be a successful stock trader if you do it the majority of the time. Now comes the first issue: how do you know when to buy? There are possibly multiple ways to do this; we won’t go over them here; instead, assume you know or believe you know. Let’s imagine you were lucky and the stock went up after you bought it, exactly as you expected.
Then there’s the question of when to sell. What do you do after the stock has risen 20%? Should you sell now or wait until it has increased by 50%, 100%, or 200 percent? Do you pay attention to investor news and follow the crowd’s lead by selling, buying more, or keeping the stock? How much stock should you buy or sell if you chose one of the first two options? Or, if you hold the stock, are you confident that it will continue to rise, or will you wait until the stock price has returned to its initial level, at which point it will lose value, resulting in your losses?
The truth is that some people do know the answers to those questions the majority of the time and profit from it. Is it true that you are as good as those people? The majority of people are losing money by speculating and attempting to time the market. If you’re new to the game and don’t expect to spend much time researching, you’re likely to lose. You’ll be up against skilled traders, huge players, and insiders who win only because others continue to lose. What are the possibilities of you being able to anticipate the market? The possibilities are slim to none.
Some would claim, “I had that stock, and I sold it when it was up 20%, but if I hadn’t sold it at that time, it would now be up 300%.” How foolish I was to sell it; if I hadn’t, I would have made a lot of money. This is something I’ll have to do again. It clearly demonstrates that I can make a lot of money there and that it is simple! Yes, you may make a lot of money, but it is not as simple as it appears. Let’s pretend you didn’t sell the stock when it was 20 percent higher. What makes you believe you’ll wait till it’s up 300 percent? You might have sold it when it was only up 25%. Or it may go down numerous times below a 20% increase, leading you to believe it was going down forever and selling it at a loss of less than 20%.
The main fact is that it is simple to look back and see all of your blunders. However, doing the correct things for the future is really tough. You won’t be able to make profitable trades unless you have a thorough understanding of market patterns, connected industries, and stock company financials. Even the most experienced traders make mistakes and lose money. If you aren’t one of them or don’t intend to be, your best bet is to invest in CDs, mutual funds, or your own business.